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Cox: NHL gets caught in beer deal snafu

It was the fifth paragraph of Gary Bettman’s traditional state-of-the-game speech at the Stanley Cup final, and it was delivered in upbeat, triumphant tones.

“The strength of our game on the business side,” said Bettman, “could be best illustrated by our reaching the largest sponsorship deal in our history, the Miller-Coors-Molson deal, and the largest, most comprehensive (television) deal in our history with NBC Universal Comcast.”

The TV deal, maybe — particularly after Game 1 between the Vancouver Canucks and Boston Bruins delivered very positive numbers in the U.S., particularly Boston.

But the beer deal? Not so fast.

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Just two days after making those comments, words that went by without question given that the day’s big news was Colin Campbell’s shift out of the league’s disciplinary role, Bettman had to have been stunned to learn of an Ontario court ruling that effectively struck down the $375 million Molson-Coors deal.

Why? Well, as reported in the Saturday Star by Josh Rubin, because Ontario judge Frank Newbould ruled that the Canadian rights included in the Molson-Coors package had already been sold to Labatt.

Oops. Not the kind of business profile a league wants, essentially an allegation of double-dealing from a court.

“We obviously do not agree with the reasoning or holding of the Court, and we plan to pursue an appeal expeditiously,” said Bill Daly, the NHL’s deputy commissioner and chief legal officer, on Saturday.

It’s been a mixed bag this week for the NHL as far as news from the business side, that’s for sure. The TV numbers from Canada were enormous for Game 1, and encouraging from the U.S. side, and on Saturday, the new Winnipeg franchise announced it had needed only minutes to complete its drive to sell 13,000 season ticket packages, a spectacular vote of confidence in the Mark Chipman-David Thomson ownership group.

“While I had no doubt the ‘Drive to 13,000’ would reach its destination, the remarkable speed at which it got there certifies the fans’ hunger for NHL hockey and their commitment to True North’s initiatives,” said Bettman in a statement.

But those ticket numbers, and Bettman’s attempt on Tuesday to portray the shift of the Atlanta Thrashers to Winnipeg as a calculated move to get back to a city the NHL should not have left 15 years earlier, can’t cover up the glaring reality that the league has been forced out of the fourth-largest TV market in the U.S. because nobody had interest in owning and operating the franchise there.

Even worse, it was the NHL’s second attempt to do business in Atlanta, which had been a key part of Bettman’s four-team expansion strategy that bumped the league to 30 teams from 26 just 11 years earlier.

Then there’s the ongoing fiasco in Phoenix, allowed to carry on only by the decision of local politicians to throw another $25 million down the Coyote sewer next season. A proposal by Chicago businessman Matthew Hulsizer to buy the team has gone on and on for months, with no resolution.

Now comes the rejected beer deal, which not only robs the NHL of revenue but also draws into question the league’s management.

“It’s very embarrassing,” said one industry analyst. “Basically, they were trying to sell the same property twice and got caught.”

The Ontario Superior Court justice said in his ruling that Molson-Coors suspected the league had already reached a deal with Labatt when it decided to pursue an agreement with the NHL, and ultimately signed a seven-year deal for North American rights. The judge ruled the NHL had already sold the Canadian part of those rights to Labatt, but for significantly less money.

“In my view, the NHL should not be entitled to profit from its breach of its agreement with Labatt,” wrote Newbould. “Labatt should be entitled to its bargain and its unique marketing position resulting from the agreement to be the Canadian sponsor of the NHL for the next three years.”

The ruling quoted an internal Molson-Coors email saying the company entered into talks with the NHL “with great suspicion” over a possible existing deal with Labatt, and sought indemnities from the league in the event of legal action by Labatt. But Newbould also said he had “some difficulty with the concept of Molson being an innocent third party.”

Labatt released a statement Friday evening indicating it believes its deal will now be enforced, but it will make for strained relations with the league. Labatt also controls rights for 21 of the 23 existing U.S.-based NHL clubs.

“They may need Dr. Phil to help them work this out,” said one insider.

All in all, not good for the NHL. Even if there is a successful appeal, Friday’s judgment creates a bad smell at a time when the Bettman administration clearly believes it has really hit its business stride, just six years after the last lockout threatened to damage the league’s business.

A month ago, the league had a team in a big U.S. city, Atlanta, and a “monster” new beer deal with Molson. Today, both are gone, one through a lousy set of owners and the other by business practices found by a court to be highly questionable.

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